Thriving Norway provides an Economics Lesson(nytimes.com)
nytimes.com
Thriving Norway provides an Economics Lesson
http://www.nytimes.com/2009/05/14/business/global/14frugal.html?_r=1&em
53 comments
Agreed. And some people are already saying that. From the article itself:
“We have become complacent,” Mr. Mork added. “More and more vacation houses are being built. We have more holidays than most countries and extremely generous benefits and sick leave policies. Some day the dream will end.”
“We have become complacent,” Mr. Mork added. “More and more vacation houses are being built. We have more holidays than most countries and extremely generous benefits and sick leave policies. Some day the dream will end.”
"The dream" will end only if the oil runs out before the oil fund is large enough to offset the tax gap.
As it is, most oil revenue is set aside, and there wouldn't be a massive budget deficit if the oil revenue went away tomorrow. Doesn't mean there wouldn't need to be some adjustment if the oil revenue dried up, since it provides a lot of employment and the cost of dealing with increased unemployment could be significant, but Norway is surprisingly independent of the oil revenue, and becoming increasingly independent of it as the oil fund swells.
As it is, most oil revenue is set aside, and there wouldn't be a massive budget deficit if the oil revenue went away tomorrow. Doesn't mean there wouldn't need to be some adjustment if the oil revenue dried up, since it provides a lot of employment and the cost of dealing with increased unemployment could be significant, but Norway is surprisingly independent of the oil revenue, and becoming increasingly independent of it as the oil fund swells.
The government enjoys a budget surplus of 11 percent and its ledger is entirely free of debt.
The have a huge surplus and are saving 11% of their governmnets bugdet. At some point their savings could probably fund all government spending at which point running out of oil would not be the end of the world. Granted government spending is only 40% of GDP but 30 years from now they could have 40% unemployment and still have a stable functioning society.
The have a huge surplus and are saving 11% of their governmnets bugdet. At some point their savings could probably fund all government spending at which point running out of oil would not be the end of the world. Granted government spending is only 40% of GDP but 30 years from now they could have 40% unemployment and still have a stable functioning society.
But how safe is their investment? What can they own to keep themselves in a comfortable lifestyle (nearly) forever? Stocks and currency won't do it.
It's probably part of the reason for the push to renewable energy and energy efficiency. And also services/IP?
It's probably part of the reason for the push to renewable energy and energy efficiency. And also services/IP?
I suspect that homogeneity and culture explain why they didn't blow all of their oil money in boom times like other oil producing nations. I wish Americans could see the same type of restraint in their politicians.
What effect does homogeneity have?
Homogeneity makes it easier to build a governing consensus; people can believe there's an optimal policy benefiting everyone, "because we're all so alike", rather than a zero-sum contest between disparate groups.
Norway has gotten quite a lot of immigrants the last couple of decades and homogeneous might not be a key word anymore.
A couple of friends of mine are Bangladeshi academics. They are the nicest, "squarest" and most hard working nerds I've ever met. I had lots of fun sending them a reference to the news last year -- about problems in Oslo with Bangladeshi street gangs... :-)
But sure, the problems with planning and controlling a society isn't proportional to the population, more like the population squared.
It should also be less problems with fewer variables.
A couple of friends of mine are Bangladeshi academics. They are the nicest, "squarest" and most hard working nerds I've ever met. I had lots of fun sending them a reference to the news last year -- about problems in Oslo with Bangladeshi street gangs... :-)
But sure, the problems with planning and controlling a society isn't proportional to the population, more like the population squared.
It should also be less problems with fewer variables.
Agreed on the small homogeneous population.
Not true on the oil exporting. Just look at the neighboring countries.
Without oil, Norway would be like Denmark, or Sweden.
Without oil, Norway would be like Denmark, or Sweden.
Yeah. And Denmark and Sweden aren't particularly bad places to live. There is broad sentiment in Norway that we would be living in caves if it wasn't for our oil reserves, but this obviously isn't the case.
There are downsides to having a very homogeneous culture, of course. If you are different, you will have a hard time finding a broad network of friends. Norwegian culture is pretty tolerant in the most important ways, but a total population of 1/4 that of any major world city is noticeable. In terms of land area, our country is larger than you would think. This isn't just some weird enclave.
But it is probably impossible to enforce harmonically coexisting, internally homogeneous cultures. And I'm not even sure that would be something we'd want. My most important personal value is freedom to, within reason, do and say and think whatever I want. Meeting different cultures first-hand is often necessary in order to be able to do this, since there is a broad range of behaviors and mindsets that are excluded within any particular culture. We create our own intellectual walls without even thinking about it.
There are downsides to having a very homogeneous culture, of course. If you are different, you will have a hard time finding a broad network of friends. Norwegian culture is pretty tolerant in the most important ways, but a total population of 1/4 that of any major world city is noticeable. In terms of land area, our country is larger than you would think. This isn't just some weird enclave.
But it is probably impossible to enforce harmonically coexisting, internally homogeneous cultures. And I'm not even sure that would be something we'd want. My most important personal value is freedom to, within reason, do and say and think whatever I want. Meeting different cultures first-hand is often necessary in order to be able to do this, since there is a broad range of behaviors and mindsets that are excluded within any particular culture. We create our own intellectual walls without even thinking about it.
Yes, Denmark, Sweden and Norway are similar. Sweden is not a net exporter of oil AFAIK.
But oil is the biggest export of Denmark. Norway just has a lot more. Only Russia and Saudi Arabia exports more oil than Norway IIRC.
But oil is the biggest export of Denmark. Norway just has a lot more. Only Russia and Saudi Arabia exports more oil than Norway IIRC.
being an energy exporter ensures that there's enough wealth to go around to provide its citizens with a large social safety net
This is a powerful strategic argument for proactively promoting carbon neutral energy in advance of the market. This is especially true for energy delivered in the form of electricity, due to the nature of its delivery infrastructure. Someone stands to benefit from first mover advantage here.
This is a powerful strategic argument for proactively promoting carbon neutral energy in advance of the market. This is especially true for energy delivered in the form of electricity, due to the nature of its delivery infrastructure. Someone stands to benefit from first mover advantage here.
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Your example of New York is a particularly funny one since there is a pretty big divide culturally and economically between NYC and the rest of the state. There are a lot of people in the western part of the state who feel they contribute just as much wealth yet do not benefit from the "large social safety net" you speak of.
He was talking about Norway's social safety net, and just used NYC to illustrate how small Norway's population really is.
Just to avoid further confusion, New York City has a population of 8 million. I was referring to the New York State.
Either way, the point still stands.
Either way, the point still stands.
In other words, Norway's lessons are very applicable to other energy exporting nations. But probably not many lessons that can be implemented by energy importing nations.
Ok, Norway is a net oil exporter and has huge benefits because of that... But can you please stop mentioning that every time you read Norway, completely ignoring everything else they managed to do right?
USA had much more natural resources than Europe, that doesn't mean you should ignore everything else they did well over time to get where they are now.
So the secret is to be a country full of dour, responsible people who discover fabulously valuable natural resources, and can thus afford to subsidize even the most degenerate kinds of behavior?
I think the point here is that subsidies doesn't really matter for the big picture. It could be that some of these outrageous benefits wouldn't happen if it wasn't for a very wealthy state. The question is what you would be left with. It's probably a fair assumption to look at the countries around it.
What you find is that the real strength of these countries are in their culture, not in their natural resources.
Another thing to consider is how one would actually manage this kind of wealth if you actually obtained it. In my opinion, the way Norway spends huge amounts of money on foreign development projects, spreading progressive values such as gender equality, and promoting the role of the UN, are certainly better than building huge palaces or indoor ski slopes.
What you find is that the real strength of these countries are in their culture, not in their natural resources.
Another thing to consider is how one would actually manage this kind of wealth if you actually obtained it. In my opinion, the way Norway spends huge amounts of money on foreign development projects, spreading progressive values such as gender equality, and promoting the role of the UN, are certainly better than building huge palaces or indoor ski slopes.
Degenerate behavior like old age, education and accidents?
Did you read the article?
"Just around the corner from Norway’s central bank, for instance, Paul Bruum takes a needle full of amphetamines and jabs it into his muscular arm. His scabs and sores betray many years as a heroin addict. He says that the $1,500 he gets from the government each month is enough to keep him well-fed and supplied with drugs.
Mr. Bruum, 32, says he has never had a job, and he admits he is no position to find one. I don’t blame anyone, he said. The Norwegian government has provided for me the best they can."
Why should other people be forced to subsidize that kind of lifestyle?
"Just around the corner from Norway’s central bank, for instance, Paul Bruum takes a needle full of amphetamines and jabs it into his muscular arm. His scabs and sores betray many years as a heroin addict. He says that the $1,500 he gets from the government each month is enough to keep him well-fed and supplied with drugs.
Mr. Bruum, 32, says he has never had a job, and he admits he is no position to find one. I don’t blame anyone, he said. The Norwegian government has provided for me the best they can."
Why should other people be forced to subsidize that kind of lifestyle?
The people subsidize it because they believe doing so makes everyone (including themselves) better off that way.
See http://news.ycombinator.com/item?id=609997
The salient point is that even if I'm happy to subsidize that sort of lifestyle, I don't think the government should make the decision for me (especially not at the point of a gun).
The salient point is that even if I'm happy to subsidize that sort of lifestyle, I don't think the government should make the decision for me (especially not at the point of a gun).
Unless you're suggesting that the tax-rate be 0% then the "point-of-a-gun" argument is disingenuous. All taxes are at the point of a gun. You can't simply argue from this position when the target of the funds is something you don't support.
If you think all taxation is inherently illegitimate, that's fine, but such a position is not strengthened by your disapproval of the target of the tax funds, no matter how silly or frivolous you think that target is. If, on the other hand, you think some taxes are reasonable -- that is, it is acceptable to apportion according to a majority in some cases -- then your argument needs to address the inappropriateness of the target of the funds, not the legitimacy of the taxation itself.
If you think all taxation is inherently illegitimate, that's fine, but such a position is not strengthened by your disapproval of the target of the tax funds, no matter how silly or frivolous you think that target is. If, on the other hand, you think some taxes are reasonable -- that is, it is acceptable to apportion according to a majority in some cases -- then your argument needs to address the inappropriateness of the target of the funds, not the legitimacy of the taxation itself.
smanek, putting aside moral considerations I think you are discounting the actual cost of leaving people like Mr. Bruum to fend for themselves and ultimately end up being incarcerated. Suppose you live in California where incarceration costs upwards of $3,500 a month. Cutting him off would end up costing you twice as much.
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"Why should other people be forced to subsidize that kind of lifestyle?"
Is drug addition a greater problem in Norway than say the US? The alternative is for Mr. Bruum to rob, pimp or deal to feed his habit.
Is drug addition a greater problem in Norway than say the US? The alternative is for Mr. Bruum to rob, pimp or deal to feed his habit.
Um, no. Subsidizing an activity will get more of it. He's more likely to consider drugs a viable choice knowing that he won't have to "rob, pimp, or deal".
The other day a beggar was asking me for money and I thought "He's just going to spend it on drugs and booze". Then I realised that's exactly what I was going to do with the money - who am I to judge this poor guy?
You don't understand.
I am all for charity (I give a fair amount myself). Any of us could fall on hard times. But I am against being forced to give money to these sorts of causes.
What if I, personally, feel like there is somebody else who is more worthy of my charity (those in the third world, those who were never given a first chance, those with genetic diseases, etc). It should be my choice who to help.
The problem I have with government welfare is that they tell me that if I don't contribute I will be thrown in jail (and if I refuse to go to jail, they will kill me). I don't like having that sort of threat hanging over my head - even if I was planning to do what they want anyways.
I have no intention of joining the KKK - but I would be just as angry if the government told me I couldn't do that.
I am all for charity (I give a fair amount myself). Any of us could fall on hard times. But I am against being forced to give money to these sorts of causes.
What if I, personally, feel like there is somebody else who is more worthy of my charity (those in the third world, those who were never given a first chance, those with genetic diseases, etc). It should be my choice who to help.
The problem I have with government welfare is that they tell me that if I don't contribute I will be thrown in jail (and if I refuse to go to jail, they will kill me). I don't like having that sort of threat hanging over my head - even if I was planning to do what they want anyways.
I have no intention of joining the KKK - but I would be just as angry if the government told me I couldn't do that.
I honestly hope you never end up in a situation where you need some kind of government help that others object to subsidizing.
In some ways, Norway is approaching a post-scarcity economy mentioned in an article that was posted here recently (http://news.ycombinator.com/item?id=607540).
This article doesn't tell the whole story. On the whole, the Norwegian economy is strong - probably stronger than most other nations, but that doesn't mean there aren't problems here. I have several friends who have been laid off this year, and even the company I worked for laid off a number of employees earlier this month.
That said, I'm still happier to be working here as opposed to being back home in the States. And, while Norwegians do work fewer hours, most of them are more productive during the hours they do work.
That said, I'm still happier to be working here as opposed to being back home in the States. And, while Norwegians do work fewer hours, most of them are more productive during the hours they do work.
If you compare Norway to the UAE (which includes Dubai, Abu Dhabi, etc) while Norway is investing its oil wealth in a sovereign fund, UAE is investing in real estate, tourism and other sectors. Both have rich social safety nets. In this way, both these energy exporting nations are smart in reinvesting/saving today's surplus. One interesting difference is that UAE is a federation of fairly autonomous states or emirates. So some states are already in the post-scarcity era (Dubai) while other states are still in the surplus era (Abu Dhabi, Ras Al Khiamah, etc). It makes for an interesting economic development scenario.
Yes, but wheras Dubai employs slave labor to build ecological atrocities, Norway is investing the money in the future of its people. It is also quite interesting that dealing with middle-eastern immigrants is a controversial issue in Norway (especially because they largely refuse to assimilate.)
Slave labor is wrong. Dubai is wrong for using it. So is anyone else who does. Norway rightly deserves credit in this regard. My initial comment is from a macro-economic point of view of how countries use/abuse their natural resources.
but norway is debt-free (accourding tfa)
i'm not sure about uae, especially dubai
i'm not sure about uae, especially dubai
Good point. I quickly did a google check and UAE does have debt but could not find percentage of GDP figures or how they compare with other countries.
That list says that Norway's public debt is 52% of GDP.
(It puts the UK at 47%, and the UAE at 22%.)
(It puts the UK at 47%, and the UAE at 22%.)
A lot of that is due to the fact that a large percentage of Norwegians are homeowners, and when a 1 bedroom apartment in Oslo can easily cost more than $200,000, well, that will add up quickly.
Their government has 350 billion / 4.7 million = 74,468$ in their oil fund per person including children. So the average person would need to be holding over 100,000$ in debt (including children) for that to balance out which seems fishy to me.
This rebuttal on Forbes helps put Norway's oil wealth into perspective.
http://clipmarks.forbes.com/2009/05/14/the-real-norway-lesso...
http://clipmarks.forbes.com/2009/05/14/the-real-norway-lesso...
"Norway has 20 times as much oil production per capita as the UK. That's the real Norway lesson. Sit on tons of oil."
Haha, brilliant. Sounds a little like a lottery winner offering financial advice.
Haha, brilliant. Sounds a little like a lottery winner offering financial advice.
"Oslo retains a feeling of modesty reminiscent of a fishing village rather than a Western capital, with the recently opened $800 million Opera House one of the few signs of opulence."
What a bullshit article. Sorry...
Lessons learned: it's good to have a lot of oil.
Did they invest so wisely? Maybe, maybe not - even if they did, who says they were not just the lucky ones that are bound to exist (just as with fund managers)?
What a bullshit article. Sorry...
Lessons learned: it's good to have a lot of oil.
Did they invest so wisely? Maybe, maybe not - even if they did, who says they were not just the lucky ones that are bound to exist (just as with fund managers)?
I agree – Oslo, a fishing village? Please.
Technology wise, Norway is way up on the list. Most of us have 20mbit ++ directly into the wall, a diverse open source environment, a subsidized media channel which delivers lots of their TV shows via BitTorrent in 1080p/720p, etc.
Technology wise, Norway is way up on the list. Most of us have 20mbit ++ directly into the wall, a diverse open source environment, a subsidized media channel which delivers lots of their TV shows via BitTorrent in 1080p/720p, etc.
Did they invest so wisely?
Here's one case (and I'm sure there are others) which is a resounding no: http://www.nytimes.com/2007/12/02/world/europe/02norway.html
Here's one case (and I'm sure there are others) which is a resounding no: http://www.nytimes.com/2007/12/02/world/europe/02norway.html
Well that's not quite the same, since that story is about municipalities investing poorly. Hopefully Norway's sovereign wealth fund didn't do likewise.
(as an aside: I've been to Narvik, in the summer, and the scenery is absolutely stunning. The 2am sunshine is also amusing to behold.)
(as an aside: I've been to Narvik, in the summer, and the scenery is absolutely stunning. The 2am sunshine is also amusing to behold.)
As others have pointed out, if you take away the oil, Norway's economy is crap. The infrastructure sucks, there aren't really any other industries to speak of, taxes are very high and the incentives for someone to start a business there are appallingly low.
Isn't Japan with zero natural resources as better case study?
This probably has more to do with their successes as a country than anything else. Smaller populations are easier to govern (New York's population is around 20mil), and being an energy exporter ensures that there's enough wealth to go around to provide it's citizens with a large social safety net.